Terraform Labs May Pay Less of $4.47bn SEC Settlement Amid Bankruptcy
Summary:
Facing bankruptcy, Terraform Labs could only be able to pay a fraction of its $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC). This settlement, still awaiting court approval, was for charges against Terraform and its founder, Do Kwon, for selling unregistered securities and defrauding investors. The SEC could be last in line for payments after creditors, making the full settlement unlikely. Despite low recovery chances, the SEC portrays it as a stern warning to illicit crypto practices.
Terraform Labs, in the midst of bankruptcy with assets of $430.1 million against $450.9 million in liabilities, could be expected to pay the U.S. Securities and Exchange Commission (SEC) a mere fraction of the multi-billion dollar settlement agreed upon in June. The company consented to a settlement of $4.47 billion with the SEC, disclosed on June 12 and awaiting court approval, comprising $3.6 billion in disgorgement fines, a civil penalty of $420 million and around $467 million in pre-judgement interest. However, the SEC may find itself standing in line after secured and unsecured creditors. Any fines and penalties owed to government bodies, including the SEC, typically get paid later in bankruptcy proceedings. The SEC is still portraying the settlement as a just penalty for one of the biggest securities frauds in U.S. history, despite the slim prospect of receiving full funds. Its founder, Do Kwon, was sued and subsequently arrested in Montenegro following charges of selling unregistered securities and defrauding investors in the wake of the Terra ecosystem collapse. There's an ongoing extradition effort from both the U.S. and South Korea for Kwon. The SEC stated in a June 12 letter to U.S. District Judge Jed Rakoff, "The proposed judgement, if approved, stands as firm warning to those involved in clear misconduct, as well as those who defy federal securities laws by concocting new behavioral norms for crypto assets under federal jurisdiction." In 2023, the agency collected fines and penalties totaling $2.8 billion, as per The Wall Street Journal.
Published At
6/13/2024 7:37:34 PM
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